Report: Obama’s College Loan Plan Would Save Avg. Borrower…’Between $4.50 and $7.75 per Month’
- Posted on October 27, 2011 at 10:46am by
Becket Adams
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Yesterday, President Obama unveiled his new plan to “ensure students are able to commit to higher levels of federally backed student loans.”
Essentially, the president has just offered a college student bailout as the finial initiative of his “We Can’t Wait” economic plan.
Two key provisions offered in the plan (as pointed out by Business Insider):
- People who hold both government-backed private sector student loans and direct loans issued by the government will be able to consolidate those debts in one government-backed loan, thereby lowering interest rates and reducing monthly payments. The administration estimates this will affect about 5.8 million people.
- The plan will accelerate income-based payment programs already passed by Congress, which allow college graduates to cap their payments at 10 percent of their income, rather than the existing 15 percent cap. Under Obama’s executive rollout, the new cap, originally scheduled to take effect in 2014, will take effect in 2013 for an estimated 1.6 million students and recent graduates.
But will these provisions really come close to dealing with the nearly $1 trillion in outstanding college debt? Some reports say “not even close.”
Daniel Indiviglio of The Atlantic put together an interesting report that calculates the impact of the president’s proposals:
Consolidation: The first would clearly be the most significant [impact], because it is aimed at helping more student loan borrowers. How much would an interest rate reduction of up to 0.5 percent affect payments?
For the average borrower, the impact would be small. In 2011, Bachelor’s degree recipients graduating with debt had an average balance of $27,204, according to an analysis done by finaid.org, based on Department of Education data. That average has ballooned from just $17,646 over the past decade.
Using these values as the high and low bounds of average student debt over the last ten years, the monthly savings for the average student loan borrower would be between $4.50 and $7.75 per month. Clearly, this isn’t going to save the economy.
Payment Limits: . . . the government already has a program for borrowers to reduce their student loan payments to a ceiling of 15 percent of their income. At this time, just 450,000 borrowers are participating. Clearly, all of those participants would benefit from lowering the max payment to 10 percent. But how many others would?
Student loan balances have really only ballooned over the past decade. So this change would affect very few Americans over the age of 32. For the young adults who it may effect, we must remember that educational attainment has some correlation to income. Those with the most debt will have attended business school, medical school, or law school. Most of those people will also have higher incomes, making them ineligible.
Loan Forgiveness: Of all these parts of Obama’s executive order, the loan forgiveness aspect will have the least impact. By moving the timeline from 25 to 20 years, it could be significant in the long run — but it won’t be felt for decades. Remember, 82 percent of the current student loan debt outstanding was accrued in just the past decade. So it will be at least another 10 years before any of those borrowers have hit the 20-year mark in their student loan payments.
And outside of the fact that his proposals may have little to no economic impact, Peter Schiff of Euro Pacific capital points out that the initiative would actually cause “college tuition increases to not only continue but to accelerate,“ and that ”Obama would be turning higher education in to a third-party payer system (not too dissimilar from our current health care system – which is also characterized by outsized cost increases).”
But what does this mean to the average U.S. taxpayer? Schiff responds:
Under this new system, colleges might charge whatever they want because their customers simply turn the bill over to the U.S. taxpayer who has no say in the transaction. Under such a system what incentive would a kid have to live at home and go to a community college? Why not attend the most expensive university that taxpayer money will allow?
With all of these details taken into account, some have claimed that the introduction of this part of the president’s economic plan is little more than a shrewdly calculated attempt to “reach out to young, educated voters, a key constituency for Obama’s 2008 campaign who now form the core of the Occupy Wall Street movement.”
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Comments (62)
wildwood
Posted on October 27, 2011 at 3:31pmHOW DOES ALL THE STUDENTS THAT STUDIED HARD, PAID OFF THEIR STUDENT LOAN OR ARE PAYING THEM FEEL ABOUT OBAMA BAILING OUT THE OTHER??????
Report Post »Now you will be paying for the others, paying for the votes Obama will get for his hand out of your taxes!!!!
Same way with the home owner he gave a little bone for a vote, you will be paying that too!!!
SOMETHING HERE IN AMERICA HAS GONE WRONG!!!!!!and it all started with this community organizer that lied his way into the whitehouse!!!!!!!
Damn the Taxes - Full Speed Ahead
Posted on October 27, 2011 at 3:30pmThe article mentioned above found in The Atlantic does have a catchy headline proclaiming that Obama’s latest effort to help people with student loans will only save them less than $10 per month. However, their calculations are wrong, and I’m sure that blazers and fox news junkies will never get the correct amount unless they search for info and do the math themselves. Anyway, based on the loan consolidation aspect of the plan with an up-to 0.5% interest-rate reduction on BOTH loans, and the other main aspect of the plan which reduces the IBR from 15% to 10% over 20-years instead of 25-years; combining the benefits of all aspects of Obama’s newly proposed plan, the average student with loans will save a minimum of $75/month up to several hundreds of dollars per month and the total repayment amount will average thousands of dollars less due to this new plan.Obviously, the greater the student loan amount is the greater the reduction, however, a person starting out with a new job that can save an average of about $100 or more per month is significant in my opinion! And the amount the Atlantic proclaimed of about saving $5 to $9 dollars per month is absurd, not to mention, WRONG!
Report Post »korbin
Posted on October 27, 2011 at 4:06pmDon’t forget the (free)** eduction for ILEGAL wet backs here in good ole Southern Commufornia……
** = paid for by the US tax payer without their consent.
Report Post »SICKOFPCNESS
Posted on October 27, 2011 at 4:20pm@ Damn the taxes…
Oh thanks for clearing that up…..now we can see clearly that this grand plan will truly save the country….It won’t matter if he saves them $1000 per month…..none of it matters if they can’t get a job!!
Report Post »njolsson
Posted on October 27, 2011 at 4:24pmSo we should believe you and not multiple public news sources? Why?
Report Post »Ookspay
Posted on October 27, 2011 at 4:29pmThe fundamental transformation of America! This man is ruining our Country! Buying votes while mortgaging our children’s future. All of these pokes in the eye can only be an intentional provocation for the productive class to revolt. obama knows exactly what he is doing, cloward and piven executed flawlessly. Lock and load my friends, lock and load.
Report Post »williamsteaparty
Posted on October 27, 2011 at 6:36pm@korbin,
On behalf of all the true Blazers please leave your racial slurs in yor head they are not welcome here!!!!!!!!!!!!
Report Post »Thank You.
finky555
Posted on October 27, 2011 at 9:19pm@damnthetaxes
Report Post »Let’s have an example. What are your credentials for saying the article is off by 10 times?
country_hick
Posted on October 27, 2011 at 9:49pmI feel likes an idiot for actually paying back all my student loans myself. After all society OWES me anything I want. We will just tax the rich some more. Can I apply the same ‘logic’ to my tractor loan?
Report Post »loriann12
Posted on October 28, 2011 at 7:06amActually they’ll save even more, because they can write the whole thing of 5 years sooner. My mom took out a student loan for nursing school when I was in the 4th grade. They were bugging her to pay it back BEFORE she even got a job. She was lucky and was hired almost immediately in an OB/GYN office and managed to pay it all back. What a dope. she could have ruined her credit, stalled on paying it back for 25 years and had all that money to spend on me…./sarcasm off.
Report Post »bdMarco
Posted on October 28, 2011 at 7:29amThe problem with this program is not the loan restructuring it’s the loan forgiveness. Essentially, it creates a huge welfare program by limiting the amount that can be collected and forgiving the remaining balance after a certain period. That balance will be picked up not by the lender, but by the federal government. That means that schools can jack up their prices, students can spend years borrowing and getting degrees that the markets may not want, take relatively low paying jobs, make small monthly loan payments and then after 20 years leave the taxpayer holding the bag for tens of thousands in debt. Who wins? The liberal elite academics and irresponsible liberal students! This is a kickback for votes and liberal propoganda provided by universities. It’s absurd, it’s another “obamanation”!
Report Post »jkjk
Posted on October 28, 2011 at 9:30amWow, now I can go to the movies…. by myself. What an as#. I can’t even look at this moron without wanting to puke! Cain / Newt or Newt / Cain 2012 !!!!
Report Post »Jim in Houston
Posted on October 27, 2011 at 3:28pmI guess it doesn’t take much to buy the vote of the brain dead.
Report Post »db321
Posted on October 27, 2011 at 4:01pmMorals Mr President – you can’t buy votes with our tax dollars. Just because it sounds good and feels good!
Republicans get ready – if you vote this down you will be demonized even more – if fact you, may fall below the level of us hard working, honest, christian, tax payer, workers and Business owners.
Report Post »rationallyurs
Posted on October 27, 2011 at 3:23pmjust smoke and mirrors–he likes to look in the mirror and hear himself talk
Report Post »Jim in Houston
Posted on October 27, 2011 at 3:28pmWhile the smoke comes out of his @ss.
Report Post »Carol Ingian
Posted on October 27, 2011 at 3:22pmSaves $4.50-$7.50 a month? Woo-hoooo! ;)
Report Post »@leftfighter
Posted on October 27, 2011 at 3:34pmMy thoughts exactly.
Thank you, Mr. Obama. I can go to Mc Donald’s and *almost* pay for one meal a month thanks to your authoritarian moves.
All this proves “is, is” Obomba is more about making big splash Populist moves intended to boost his approval ratings rather than opening the markets up and letting the job creators fix the problems we’re facing today. SMH
Report Post »BertM
Posted on October 27, 2011 at 4:15pmWOW. That’s gonna get him re-elected. NNNNOOOOOTTTTT!!!!!!!!!!!!!!!!!!!!! I took out a student loan when I went to college and I paid it off. If the OWS crowd get their student loans forgiven, can I have my money back. It’s only fair. Oh, I’m a conservative I am supposed to get screwed.
Report Post »GulfPeg
Posted on October 27, 2011 at 3:18pmObama is making a fool out of himself! Can’t wait until we throw him out on his ear!
Report Post »nelan72
Posted on October 27, 2011 at 3:17pmHow much is he going to BUY votes for this coming election for?
Report Post »wildwood
Posted on October 27, 2011 at 3:17pmA cheap shot to get votes using taxpayer money!!!!!! Obama probably know that lots of the college kids will not be able to figure out that he did a snow job on them!!!!
Report Post »Too many kid go to collecollege,take easy subjects just to claim they have a college education but lo and behold they find out they just cheated thmselves, that is why you see all these college kid protesting!!! They never took their college seriously, just wanted to get away from home, party and have a good time!!!
NOW THE RESPONSIBLE PEOPLE ARE SADDLED WITH BAILING THEM OUT!!!!
This out rages, unacceptable, and every one should let their representivies know how they feel about bailing them out as well as all the home owner that got a little bone for a vote this week!!!
I THOUGH BUYING VOTES WAS A FELONY??? iT IS OUT HERE IN THE REAL WORLD!!!!
I.Gaspar
Posted on October 27, 2011 at 3:04pmLet’s see…$4.50-$7.50 a month for a vote…sort of a voter’s annuity plan.
Report Post »With that money the students can buy one or two gallons of gasoline a month NOW…and a gallon or less a month if he gets re-elected….because that’s when the hammer will go down on energy production.
And this is our “president”?
Jim in Houston
Posted on October 27, 2011 at 3:29pmNOT MY President!
Report Post »self-reliant man
Posted on October 27, 2011 at 3:03pmThese people are always looking for others to provide for them. They don’t know the cost associated with anything. Their mothers probably cleaned up every mess they ever made. I couldn’t afford school so I joined the Army and got shot at to help me pay for it. I now work full time and take 18 credit hours a semester so I can provide for my family. It’s interesting the amount of the average loan and how much it has increased over the past decade. No one wants to work anymore when they go to school. Play play play and let someone else pay for it later.
Report Post »netmail
Posted on October 27, 2011 at 3:00pmYou have to be kind of old to remember this jingle but….”Kool Aid, Kool Aid, can’t wait…” What he’s really saying is: “bottom’s up suckers”. Wake up students….reality is calling.
Report Post »RayOne
Posted on October 27, 2011 at 2:46pmElectioneering is when it is an Out Right Lie.
Report Post »Arshloch
Posted on October 27, 2011 at 2:45pmAnother piece of windy city thuggery; votes by the big lie.
Report Post »ThePatriot88
Posted on October 27, 2011 at 2:39pmI have a little over $105k in loans.. I don‘t make enough but I’m not saying I won’t pay it back. I would love to be able to set it up to where a percentage of my check goes straight there so I don’t have to worry about it. It would be amazing actually, but to say “do what you can for 20 years and we’ll erase it” isn’t sending the right message. And this still allows schools to charge these God-awful prices… seriously… there’s no need to charge students $25k a semester just for being out of state.
Report Post »lukerw
Posted on October 27, 2011 at 2:38pmLet’s see… Loans were at 2%… then Obama took them over, raising them to 7% + Points for filing… and now Obama want to reduce His Cut? Cool!
Report Post »tom
Posted on October 27, 2011 at 2:24pmHis was paid for by those he bows to…
Report Post »Gonzo
Posted on October 27, 2011 at 2:08pmNow you get an extra six pack every month kiddies…hooray.
Report Post »11:11
Posted on October 27, 2011 at 1:35pmi went to school full time, worked full time and paid off my loans in 10 years and yeah it was a b!t@h but it was the right thing to do, and i remember when it used to be a stigma to default on your loans, nowadays it’s a badge of honor?
Report Post »marhee9
Posted on October 27, 2011 at 2:24pmExactly. Now we have the President telling the kids, that someone else will pay for their education because they shouldn’t have to work hard for anything. This whole entitlement mentality will not end well for anybody. http://www.youtube.com/watch?v=IlIS6gRq32Q
Report Post »11:11
Posted on October 27, 2011 at 1:30pm“We can’t wait”( to further take this country down into the portals of hell!) time is of the essence for him to accelerate his plans, and i know that it‘s not all obama that wants to see the west’s demise but he sure is doing his share
Report Post »Stoic one
Posted on October 27, 2011 at 1:22pmI am sure the default regulations will also become far more stringent. I defaulted on mine and paid the price… five-fold the original amount. This is one of the many back door type regulations the gov’t will not tell you about, along with bankruptcy is not available on college loans.
Report Post »dlivelli
Posted on October 27, 2011 at 1:08pmJust don’t get why this is being done??? It really makes no “real”difference and does not address let alone solve the problem. The problem is not the banks that “make these poor kids pay back loans they signed for” ; nor is it the evil corporations that won’t pay them enough. When will these deceivers go after the real culprits…..the colleges that charge the outrageous prices to keep the liberal tenured professors living the high life? I guess obama won’t be happy until he makes all the decisions for everyone…..we are all just too stupid to know what is best for us you know. Just ask nancy pelosi……she will tell you why we can’t live without her and the rest of the intelligent elites!
Tired of people who think they are smart tell me I’m stupid….the do as I say not as I do crap. Hey I’m no Einstein…..but I’m no “baby huey” either! (that might only ring with those of you that know the old Bugs Bunny cartoons)
Report Post »What say you?
InversionTheory
Posted on October 27, 2011 at 1:24pmAgreed. I’d LOVE not to have to pay my student loans….But my payments are way less than 10% of my income anyway. I am the 53%, goshdarnit!
Report Post »SmallGovBigGuns
Posted on October 27, 2011 at 12:58pmYES WE CAN! ahhh I’m going down and buying 7.5 double cheeseburgers at mcdonalds. take that michelle my bell obama
Report Post »Founding Father2
Posted on October 27, 2011 at 12:56pmNow Krauthammer was right on top of this issue when he said: If Students Knew Truth Of Loan Plan, Obama Would‘ve Been ’Laughed Out Of That Auditorium’: http://www.americanparchment.com/video/2011/oct/krauthammer_obama_laugh.html
This is exactly right. I read in other places it only saves students $10 a month, it would allow debt collectors call students on the phone and harrass them if they don’t pay etc.
Report Post »ColoradoMaverick
Posted on October 27, 2011 at 12:48pmThat’s a heck of a deal in exchange for a free vote for Obummer in 2012. He is speaking to our young Americans because anyone with common sense knows it’s just a scam.
Report Post »J.C. McGlynn
Posted on October 27, 2011 at 12:44pmObamathethics?
Report Post »Meyvn
Posted on October 27, 2011 at 5:13pmfo sho.
Report Post »obamabirthcertificate.net
Posted on October 27, 2011 at 8:59pmPresidential candidates now have “legal standing” to challenge Obama in court. Each must file a lawsuit alleging fraud and failure to qualify as a natural born citizen, meaning born in the US to TWO US citizen parents, as required of the President by the Constitution, or be dismissed as untrustworthy!
It costs nothing to learn why a “natural born citizen” is not the same as a citizen, but it could cost you everything if you don’t.
How to quickly understand eligibility.
Report Post »http://www.ObamaBirthCertificate.net